Retirement saving makes one wealthy, healthy

If Ben Franklin were alive today, he might coin a different saying. Instead of "early to bed and early to rise, makes a man healthy, wealthy and wise," he might say something – though it doesn't quite roll off the tongue the same way as the original – to this effect:

Saving for retirement makes a man — and no doubt a woman — not only wealthy, but healthy.

Yes, workers who are saving for retirement are more inclined to care of their health than those who aren't salting away money in their nest egg, according to a study conducted by Lamar Pierce, an associate professor at Washington University, and doctoral candidate Timothy Gubler.

The reason has to do with something called time discounting – a person's tendency to value smaller immediate rewards over future desired results.

If you value large future rewards more than small immediate rewards, you're more likely to save for retirement as well as to improve your health in the wake of tests that reveal high cholesterol, high blood pressure and the like.

In their study, Pierce and Gubler found that retirement contribution patterns and future health improvements were highly correlated, though not causal. "Employees who saved for the future by contributing to a 401(k) showed improvements in their abnormal blood-test results and health behaviors approximately 27% more often than non-contributors did," the authors wrote in their study, "Healthy, Wealthy and Wise: Retirement Planning Predicts Employee Health Improvements." "Our analysis suggests that the same underlying psychological factors that are linked to retirement planning also predict health-improvement behaviors."

That finding has at least one expert excited. "When people are informed of their situation, they rationally act in one domain and capture spillover benefits in other domains," says Wesley Gray, a finance professor at Drexel University. "This is kinda cool."

Even though people value the future differently, one thing seems certain: "A person's previous choices about long-term investment in one domain, financial for example, can predict what they are likely to do in another, health for example," Pierce says. "And for people who care about their future, simple interventions such as education and testing can make tremendous positive impacts on their lives."

Others agree with the role that education and testing can play in helping people become healthy and wealthy. "An important reason people change bad behavior is because of education towards different financial and non-financial risks," says Victor Ricciardi, a finance professor at Goucher College and co-editor of Investor Behavior: The Psychology of Financial Planning and Investing. "In the short term, investor education changes our bad habits about saving for retirement," he says. "But over the long term, for many investors, it is difficult to maintain good financial habits, and companies need to try different types of messaging and framing to remind retirement savers."

Providing education and information on health and retirement is unlikely to help everyone in the same way. "It will only help those people predisposed to taking action for long-term well-being," Pierce says. "Different people may require different policies and interventions to improve financial and physical health."

. "True," Gray says. "You can bring a horse to water, but they may not drink it. We see this in the domain of investing all the time. Highlight to someone how their decision making is flawed, show how it applies in their investment decisions, and then we watch them repeat the same flaw and suffer the same poor consequences. I guess this is why fast-food companies, tobacco companies, casinos and all 'vice selling' shops do so well — bad habits die hard."

"Another explanation is that those who save and take care of their health are high on the personality trait of conscientiousness," says Talya Miron-Shatz, an associate professor at the Ono Academic College in Kiryat Ono, Israel. "When narrowing down personality to the 'Big Five,' the main traits that determine who you are and how you behave, it's the people high in conscientiousness who are tidy, don't skip school, take their medication on time and avoid temptation in other ways, including not spending when they feel like it."

It's worth noting, too, that Pierce and Gubler's study was correlational, not causal. "That is, saving for your pension does not miraculously improve your health," Miron-Shatz says. "It's the general approach of 'taking care of your future' that guarantees both and also probably means you have good snow tires and clean your gutters once a year."

What does all this mean for you? What can be done to help you become healthy and wealthy, given Pierce and Gubler's study?

One possible takeaway is that some of the same strategies people use successfully to manage their health could be helpful in improving retirement savings. "I'm stretching a bit here, but defaults in retirement plans are often thought to be helpful," Pierce says.

A better strategy might include implementing the types of things people do for improving health, such as weight-watcher-type group programs. That, in addition to having regular meetings with financial advisers, peer competitions and group competitions, would help people save or save more for retirement. "Anything that gets people excited about saving, 'gamifies' it or generates social pressure or competition" would work, Pierce says.

. "What to tell investors?" asked Terry Odean, a professor of finance at the University of California-Berkeley. "Save for retirement and exercise. The same advice I would have given yesterday."